To common users of banking services, money transfers are money transfers. As in, you don’t consider them complex: just a tool to send and receive funds. But then, you face a plethora of terms like bank transfers, wire transfers, electronic payments, online transfers, and so on. And you start to wonder – “is there a difference between all of these?” and “what should I use?”. Well, let’s figure it out together! In this article, Genome will primarily focus on bank transfers and wire transfers and how they differ and compare wire payments to other transfer options as well. Wire transfer:
A business bank account is often a topical matter for company owners and merchants, whether you already have one and it is an essential part of your business, or you are an aspiring entrepreneur who is only thinking about opening the account.
In today’s blog post we have gathered the main information about a current business account and why do you need it, as well as put together a guide for start-up and small business owners on how to open one.
What is a business bank account?
A business account is an account a person opens in a bank or with the help of a Third Party Provider (TPP) to make business transactions and separate company’s finances from personal ones. If you’re just starting your business, you’ll need this type of an account, as you don’t want to mix up your money with the company’s funds. But more on that later.
First, let’s clarify that a corporate bank account is considered the same thing as a business account by some banks, but other financial institutions differentiate between them. The difference lies in the type of company you are running. Usually, it takes a board of directors to open a corporate account – this decision is discussed and approved by the board and validated by a corporate resolution. On the contrary, a single business owner wouldn’t need to do that. Corporate accounts also have a list of authorized signers on the account.
Which banking products a business account usually includes?
The business current account combines a bunch of different types of accounts and services, which most commonly are:
A checking account – a starting point for a new business account, as the company’s money is stored there. In many cases, a checking account feels like your ‘personal’ account, as it is easy to access and allow for replenishment, withdrawal, and transfer of funds. And the best part is that usually the number of transactions is not limited. Just make sure you are not going over a minimum balance, which your bank may set.
A merchant account. You’ll need this type of account to accept credit card payments, as well as pay for your online products and/or services. If you want to find out more about this, we’ve gathered all the necessary information about a merchant account in Genome’s blog post about merchant accounts.
A savings account – another place where you can keep your company’s money, but it’s quite different from a checking account. The good news is that you can draw interest from your savings account. The not so good news – your number of allowed withdrawals will be limited. You’ll usually get 6 transactions per month. That’s why you should always consider what amount of money you will actively need during your basic business transactions and keep these funds in a checking account. As for savings account, you can deposit some funds there as long as you know that you won’t need those in the nearest future.
Commercial loans – another important aspect of a business current account, especially if your company needs funds. The landing amount and a time slot to pay it out vary among banks. While deciding on a loan, financial institutions pay attention to the reputation of the enterprise, its financial performance and fixed assets.
Why do you need a business bank account?
Having a business bank account is vital for any company owner, even though some might think that they can manage just fine using a personal account. It may be true at first, but your company eventually will start to shape up and expand, so you might need basic business account services like a merchant account, loans, etc.
There some sound reasons to open a business bank account:
Using your personal and business funds will be so much more convenient if you separate the two. It also helps to save money. Let’s face it: you can’t always set a limit for the expenses. Emergencies, fraudulent actions, stealing and even a simple inadvertency may lead to the tremendous loss of the company’s money if those are kept in your personal account. And vice versa – a business may require significant investments and you won’t even notice that your personal funds are drained. Not to mention that the separation of two will reduce the tax deduction.
You will look more presentable and serious for lenders and investors. As we’ve mentioned before, at some point your company might need additional money to function and expand. You will have a couple of options – you can take a loan from a bank, or find investors. The problem is, landers and investors may find you less ‘professional’ if you are mixing the company’s money with your own. Hence some of them may decline your request – they want to be sure that the money won’t be spent on a non-business-related thing.
No additional bewilderment with taxes. Doing taxes is a pain and you want to get through it as smoothly as possible. Thus, you wouldn’t want to mix personal and company’s money, as you will have to explain, which expenses were for business, and which – for your individual needs.
Still not convinced? You might get in trouble with your bank. If you are using a personal account for business your bank or TPP will find out sooner or later. The thing is, you can only operate this account for personal needs, not for entrepreneurship. The best-case scenario is that your financial institution will ask you to open a current account, the worst-case scenario – the account will be terminated.
Open a business bank account in Genome
What does a startup business need to open a business current account?
As you’ve already guessed, we recommend opening a business account to any company, but if you register your business as a legal entity, like corporation, limited liability company (LLC) or limited partnership, the account is mandatory.
There is some good news for startup companies though – you can get a free business account at some banks and TPPs, but some conditions may apply. To get a free current business account, you will generally need certain limits in annual turnover, annual balance sheet, minimum balance, the number of employees and transactions. Keep in mind that the requirements may vary.
Now, knowing all that, what do you need to open a business account?
First of all, choose a bank you’d like to open the current account at. Feel free to compare different banks’ affordability and fees.
Before you apply for a business bank account, make sure you check all types of business accounts they are offering and choose the one that will benefit you and your company the most.
You may open an account at the same financial institution you’re having your personal account, but consider opening an international business account. As well as an international merchant account, this type of a business account has its perks: if you want your company to operate globally, have subsidiaries in other countries or perform money transactions in different currencies – this account is for you.
After you’ve decided upon all of these things, prepare all the required documents to open an account. Typically, TPPs and banks describe the documentation that is required from customers in great detail. The documents certainly differ from country to country, but the most common ones are:
Personal identification. You’ll need a personal ID, like a passport or driver’s license, and/or a Social Security Number or its equivalent. A bank or a TPP may also require proof of your address.
Business identification. Usually, you need to provide a registration number and contact details of your company, its location, and an estimated annual turnover. Some banks may demand more info on your financial situation.
At the end of the day, it is essential that a bank or a TPP is secure, reputable and provides the best service for your company. That’s why a new-generation payment ecosystem Genome was created. With our platform, you can open multiple IBAN accounts, which allows you to exchange 25 currencies with a flat 1% interbank fee.
Genome lets you transfer money both within a country and abroad to your business and personal accounts, receive and send payments from your suppliers and track business expenses all in one place. The transfers cost less and much faster than with traditional banks.
By the way, right now at Genome you can open a business account for free, and we will not charge you monthly account fees for the time of the special offer. This is a part of the Genome’s support act during the COVID-19 pandemic, you can find out more about the conditions at our rates page.